May 21, 2013
How Will Cloud Computing Change Retail?
Along with in-memory data analytics and mobile applications, cloud computing was one of the key tech trends discussed at SAPPHIRE 2013, SAP’s international customer conference, held in Orlando last week. Before the reader gets bleary-eyed, this has the potential to be very important stuff that may very well shape the way retail and CPG professionals at every level make business decisions in the future.
Cloud computing is analogous to a power utility in that you pay for what you use (although this downplays much of the potential for the technology). Instead of electricity, you’re getting computing power in the form of applications and processing.
For retailers, cloud computing services provide significant opportunities for collaboration and connecting the internal and external value chains at minimal capital expenses. It can help enhance mobile computing by transferring knowledge quickly to the point of customer decision. It makes a retailer’s IT infrastructure much more simple and allows companies to "test drive" different non-core applications with minimal risk. And it allows retailers to optimize their IT usage, which feature significant spikes due to things like holiday demands.
Colin Haig, a retail industry lead at SAP, said the key benefits for retailers deploying cloud computing are the ability to get started with applications faster and cheaper than installing them in your systems, always having the latest versions of the application, being able to customize the solutions easier and faster and changing IT managers from support personnel to strategic advisors to the business.
BrainTrust
Recent Discussions
Discussion Questions
What effect will cloud computing have on retail and manufacturing operations? Are there current examples of retailers or suppliers using cloud computing with positive results?
Poll
Trivial impact; the industry is not clamoring or dying from lack of bigger or faster or more easily implemented computing. It’s technology looking for an application.
I agree with Colin’s comments. Cloud computing takes the pressure off the IT department to allow them to implement needed solutions quickly and at less cost. With an average of only 20% of their budget going to new projects, using a managed service that takes advantage of the cloud is the future.
Cloud computing allows retailers and manufacturers access to state of the art software/applications without installation on each machine. It allows easier sharing of data. And it facilitates customization of solutions to be quickly disseminated across a worldwide manufacturing and retailing base.
Yes, there are security concerns and if the hosting platform goes down it can wreck havoc throughout the organization. That’s why system and data backup remain important.
The cloud is where business should be going.
The Cloud has the greatest benefit for the medium and smaller retailers. They typically do not have the depth in their infrastructure support functions. But more importantly, they can work with more advanced systems like the big retailers have, at a fraction of the cost. Further, the installation is quicker and costs less.
It will take a while, but the full evolution of cloud computing will completely change the face of retail. Right now, people are tending to focus on the reduction in IT costs and complexity, but the true benefit will come as the industry completely changes from universal banners to individual shops. We have already seen some of this as clothing retailers have developed multiple banners targeted at specific consumers.
One reason this has become economical (i.e. “pop-up stores”) is that the physical store IT setup can be as simple as rolling in a PC. By plugging the store PC into an internet connection that accesses a centrally maintained software environment, IT services can be provided without any additional infrastructure. The retailer can set up a single wireless hub that is used by all its outlets in a single mall. Registers can be literally rolled from store to store. Of course this requires a robust security environment. Any time you use wireless technology it requires significant upfront planning.
Even more important is the added intelligence the centralized environment can provide to each store. “IT wholesalers” can provide the same software tools, market intelligence, and promotional tools to independent operators that the “big guys” possess. This means independents can sign up for services that enable them to compete on a level playing field. It means retail locations that cater to specific demographic groups will become more feasible because they can offer their targeted consumers the same services. It also means the role of the local management in a large retail organization will encompass more merchandising and marketing activities as they receive more intelligence on product sales and customer purchases.
The big challenge for cloud computing is not the technology. To reap its benefits, retailers must be willing to change the way they do business so that they can share the cloud based software. It is no longer economical to develop proprietary solutions or customize a purchased software package to match the way you have done business. This also a benefits the independent retailer who can quickly adapt to a new approach without needing to win the acceptance of a widely distributed organization. Training and personnel development will become the important success factors. It could even mean changes in labor mix as full time employees with key skills become essential members of the local operations.
A great possibility I see is that by adopting cloud computing, IT departments at retailers will have to worry less about the “systems” aspects of their IT systems, and will be able to focus more on processing data to obtain better insights, which is the main point of the IT system in the first place.
Our cloud platform has allowed retailers to deploy a best-of-breed application with very little cost, no upfront investments and very little time (time to market can shrink from months with traditional packaged software to days with cloud services). They only pay for what the use, the platform is always up to date, monitored and available. It is near impossible for an overworked IT department to offer the depth of services a dedicated specialized cloud vendor provides.
As was briefly mentioned, the advantages of cloud computing are to put consumers in touch with the market using other people’s computers for processing, application software and storage. A close study of the manufacturers of smart phones and tablets will demonstrate the new sales revenue and marketing advantages these companies have in the new rules of 21st century marketing. Companies wishing to get on board without building devices of their own for sale should look to their own enterprise system to create effective sites and apps for any and all devise trends.
The other options that were pointed out and supported in this article remove any ownership of the data retailers pay to create. There are many other high risks when turning over portions of your IT needs. For instance, there is a single payroll service company that can provide financial information for most of the residents and non residents of the USA. Maybe this is okay with you, maybe it is not, but many of us have no control over a lot of our own private information. The potential for cloud computing to gather much more personal information as well as new types of information about consumers will effect many more aspects of our lives and properties. The beauty of the opportunities for this is that individuals and corporations must ask to be invaded, thus all risk and damage is the customer’s problem.
Retailers, being the customer facing industry that they are, need to always be where their customers are, technology-wise. We have learned all too well in these recent years that today’s retailers simply are not!
With about 60% of their IT budgets going toward maintenance to keep the lights on, the resources are just not there.
Over all my 35+ years, one thing I’ve seen consistently in retail is that retailers have always looked for ways to push spending back up the supply chain or out into services. With thin margins and the need to be nimble, that has been the best game to play.
I think we are finally looking at an answer that will help retail achieve their goals, provide better collaboration, share the spend, and benefit all.
The ‘Cloud’!
I had seen a presentation somewhere which compared computing to a utility. Just as how energy/electricity is a utility which we often take for granted, cloud computing will soon become such a utility. People won’t need to own anything, just use it how much you need and pay for the service—computing power, storage, etc.
It’s already started with personal computing and soon will move to the corporate and retail world.
Colin Haig points to the multiple value points of cloud computing—speed, efficiency, real-time data, and customization in order to make better decisions.
The sooner retail moves from keeping the data asset in the back room, and moves it to the operational levels of their organizations—sales floor, warehouse, distribution/allocation—the greater their advantage.
The time to take action is NOW.
I think the answer lies somewhere between Dr. Needel’s “nothing” and Mr. Bittner’s “everything” which would seem to make it like almost every other influence on retailing, technological or otherwise, though I tend to lean more toward the former. Retailing has a lot of challenges, from sourcing and low wage/high turnover issues all the way up to sales tax collection, but as many here have often noted, it makes only sporadic use of the tools it already has available. To take the utility analogy one step further: you may pay only for what you use, but if you leave the lights on in an empty room, you won’t get much from it.
Cloud-based computing is already here and disruptive—ignore at your own peril. Let me give the more disruptive effects:
- Ability to offer cloud-based POS systems in multi-lingual capabalities allowing rapid global expansion.
- Ability to update taxes and pricing for holidays and other events such as hurricanes and share intelligence.
- Ability to stream digital marketing media to digital signage based on department and store location.
- Ability to interface with scan-based trading seamlessly without any additional software/hardware at the location.
- Ability to quickly create short-term “pop-up shops” based on time/space events such as the Big Game or New Year.
- Ability to upload security video for the day to the cloud and get back a report of traffic patterns analyzing the movement of people around the store.
I would say cloud computing is very disruptive….
Retail, though one of the oldest industries, continues to experience costly, complicated, and cumbersome processes related to store IT operations and expansion. They impact launching new stores, the cost of store IT infrastructure, and integration of distributed information for effective analysis. Furthermore, despite the maturity of the industry, there has been limited innovation in key solution components such as point of sale (POS), in-store server monitoring and management, power management, and availability of key information to provide real time data insights.
Among the decisions related to the cloud, a retailer needs to identify, or assess, what you can, or should, deploy on the cloud. It’s best to understand the associated workload or characteristics of the existing or proposed systems. You could approach this from the bottom up (traditionally, more accurate) or from the top down. Some common workload characteristics include peak loads (transaction), computation intensive (driven by analytics), integration needs (currency of data), and data volatility (static versus fast changing). Knowing the workload helps you identify a rationale to select a specific cloud service model.
Although most current examples of cloud deployment remain confidential, as both retailers and CPG companies see this as a competitive advantage, here’s one public example.
Whether or not a company selects applications to be in the cloud or not depends on the application’s use. Some companies have a real time requirement to analyze data from multiple sources. This implies a client side tool. Others have a greater need to move workload to a different environment and provide broader access to information.
There are positives and negatives to cloud applications. It’s important to conduct a full business analysis to understand if the business needs are better fulfilled as a cloud implementation or behind the fire wall. Business users can say this is an IT issue. It’s everyone’s issue to understand because ultimately business groups tend to pay for it. Also, it’s the end user who’s performance will ultimately be impacted if query speed and other issues arise.
Impact of cloud computing (1) Save costs (2) Gain ability to use applications on need basis (3) Worry about security issues….
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Trivial impact; the industry is not clamoring or dying from lack of bigger or faster or more easily implemented computing. It’s technology looking for an application.
I agree with Colin’s comments. Cloud computing takes the pressure off the IT department to allow them to implement needed solutions quickly and at less cost. With an average of only 20% of their budget going to new projects, using a managed service that takes advantage of the cloud is the future.
Cloud computing allows retailers and manufacturers access to state of the art software/applications without installation on each machine. It allows easier sharing of data. And it facilitates customization of solutions to be quickly disseminated across a worldwide manufacturing and retailing base.
Yes, there are security concerns and if the hosting platform goes down it can wreck havoc throughout the organization. That’s why system and data backup remain important.
The cloud is where business should be going.
The Cloud has the greatest benefit for the medium and smaller retailers. They typically do not have the depth in their infrastructure support functions. But more importantly, they can work with more advanced systems like the big retailers have, at a fraction of the cost. Further, the installation is quicker and costs less.
It will take a while, but the full evolution of cloud computing will completely change the face of retail. Right now, people are tending to focus on the reduction in IT costs and complexity, but the true benefit will come as the industry completely changes from universal banners to individual shops. We have already seen some of this as clothing retailers have developed multiple banners targeted at specific consumers.
One reason this has become economical (i.e. “pop-up stores”) is that the physical store IT setup can be as simple as rolling in a PC. By plugging the store PC into an internet connection that accesses a centrally maintained software environment, IT services can be provided without any additional infrastructure. The retailer can set up a single wireless hub that is used by all its outlets in a single mall. Registers can be literally rolled from store to store. Of course this requires a robust security environment. Any time you use wireless technology it requires significant upfront planning.
Even more important is the added intelligence the centralized environment can provide to each store. “IT wholesalers” can provide the same software tools, market intelligence, and promotional tools to independent operators that the “big guys” possess. This means independents can sign up for services that enable them to compete on a level playing field. It means retail locations that cater to specific demographic groups will become more feasible because they can offer their targeted consumers the same services. It also means the role of the local management in a large retail organization will encompass more merchandising and marketing activities as they receive more intelligence on product sales and customer purchases.
The big challenge for cloud computing is not the technology. To reap its benefits, retailers must be willing to change the way they do business so that they can share the cloud based software. It is no longer economical to develop proprietary solutions or customize a purchased software package to match the way you have done business. This also a benefits the independent retailer who can quickly adapt to a new approach without needing to win the acceptance of a widely distributed organization. Training and personnel development will become the important success factors. It could even mean changes in labor mix as full time employees with key skills become essential members of the local operations.
A great possibility I see is that by adopting cloud computing, IT departments at retailers will have to worry less about the “systems” aspects of their IT systems, and will be able to focus more on processing data to obtain better insights, which is the main point of the IT system in the first place.
Our cloud platform has allowed retailers to deploy a best-of-breed application with very little cost, no upfront investments and very little time (time to market can shrink from months with traditional packaged software to days with cloud services). They only pay for what the use, the platform is always up to date, monitored and available. It is near impossible for an overworked IT department to offer the depth of services a dedicated specialized cloud vendor provides.
As was briefly mentioned, the advantages of cloud computing are to put consumers in touch with the market using other people’s computers for processing, application software and storage. A close study of the manufacturers of smart phones and tablets will demonstrate the new sales revenue and marketing advantages these companies have in the new rules of 21st century marketing. Companies wishing to get on board without building devices of their own for sale should look to their own enterprise system to create effective sites and apps for any and all devise trends.
The other options that were pointed out and supported in this article remove any ownership of the data retailers pay to create. There are many other high risks when turning over portions of your IT needs. For instance, there is a single payroll service company that can provide financial information for most of the residents and non residents of the USA. Maybe this is okay with you, maybe it is not, but many of us have no control over a lot of our own private information. The potential for cloud computing to gather much more personal information as well as new types of information about consumers will effect many more aspects of our lives and properties. The beauty of the opportunities for this is that individuals and corporations must ask to be invaded, thus all risk and damage is the customer’s problem.
Retailers, being the customer facing industry that they are, need to always be where their customers are, technology-wise. We have learned all too well in these recent years that today’s retailers simply are not!
With about 60% of their IT budgets going toward maintenance to keep the lights on, the resources are just not there.
Over all my 35+ years, one thing I’ve seen consistently in retail is that retailers have always looked for ways to push spending back up the supply chain or out into services. With thin margins and the need to be nimble, that has been the best game to play.
I think we are finally looking at an answer that will help retail achieve their goals, provide better collaboration, share the spend, and benefit all.
The ‘Cloud’!
I had seen a presentation somewhere which compared computing to a utility. Just as how energy/electricity is a utility which we often take for granted, cloud computing will soon become such a utility. People won’t need to own anything, just use it how much you need and pay for the service—computing power, storage, etc.
It’s already started with personal computing and soon will move to the corporate and retail world.
Colin Haig points to the multiple value points of cloud computing—speed, efficiency, real-time data, and customization in order to make better decisions.
The sooner retail moves from keeping the data asset in the back room, and moves it to the operational levels of their organizations—sales floor, warehouse, distribution/allocation—the greater their advantage.
The time to take action is NOW.
I think the answer lies somewhere between Dr. Needel’s “nothing” and Mr. Bittner’s “everything” which would seem to make it like almost every other influence on retailing, technological or otherwise, though I tend to lean more toward the former. Retailing has a lot of challenges, from sourcing and low wage/high turnover issues all the way up to sales tax collection, but as many here have often noted, it makes only sporadic use of the tools it already has available. To take the utility analogy one step further: you may pay only for what you use, but if you leave the lights on in an empty room, you won’t get much from it.
Cloud-based computing is already here and disruptive—ignore at your own peril. Let me give the more disruptive effects:
I would say cloud computing is very disruptive….
Retail, though one of the oldest industries, continues to experience costly, complicated, and cumbersome processes related to store IT operations and expansion. They impact launching new stores, the cost of store IT infrastructure, and integration of distributed information for effective analysis. Furthermore, despite the maturity of the industry, there has been limited innovation in key solution components such as point of sale (POS), in-store server monitoring and management, power management, and availability of key information to provide real time data insights.
Among the decisions related to the cloud, a retailer needs to identify, or assess, what you can, or should, deploy on the cloud. It’s best to understand the associated workload or characteristics of the existing or proposed systems. You could approach this from the bottom up (traditionally, more accurate) or from the top down. Some common workload characteristics include peak loads (transaction), computation intensive (driven by analytics), integration needs (currency of data), and data volatility (static versus fast changing). Knowing the workload helps you identify a rationale to select a specific cloud service model.
Although most current examples of cloud deployment remain confidential, as both retailers and CPG companies see this as a competitive advantage, here’s one public example.
Whether or not a company selects applications to be in the cloud or not depends on the application’s use. Some companies have a real time requirement to analyze data from multiple sources. This implies a client side tool. Others have a greater need to move workload to a different environment and provide broader access to information.
There are positives and negatives to cloud applications. It’s important to conduct a full business analysis to understand if the business needs are better fulfilled as a cloud implementation or behind the fire wall. Business users can say this is an IT issue. It’s everyone’s issue to understand because ultimately business groups tend to pay for it. Also, it’s the end user who’s performance will ultimately be impacted if query speed and other issues arise.
Impact of cloud computing (1) Save costs (2) Gain ability to use applications on need basis (3) Worry about security issues….